CARY, N.C. -

Five years ago today, the Consumer Financial Protection Bureau “opened our doors,” a milestone the regulator highlighted on its website. The Dodd-Frank Act that created the CFPB receives its operational funding the Federal Reserve, which literally can print money.

As a result, dealerships and finance companies have had to add compliance to their operating lexicon with the same frequency and importance as down payments, inventory, originations and securitizations. Some industry leaders and lawmakers have questioned the CFPB’s regulatory methodologies and enforcement actions since coming into the fray on July 21, 2011. But it’s certainly apparent the CFPB is here to stay in the auto financing space, and the players in it continue to adjust how to operate within the bureau’s reach.

To get some perspective on what these past five years have been like, SubPrime Auto Finance News reached out to a wide array of sources, including legal sage Tom Hudson, founding partner of Hudson Cook.

“Before the CFPB came into existence, the federal cop for enforcing most federal consumer protection laws was the Federal Trade Commission,” Hudson said. “The FTC, with a smaller staff than the CFPB, was charged with overseeing all businesses, not just creditors, and not just car dealers.  The CFPB’s narrower focus and deeper 'bottomless' pockets have made for a much more intense regulatory and enforcement climate.

“Surprisingly, the laws and regulations that (apply to) dealers, finance companies and other creditors didn’t suddenly get bigger when the CFPB was formed,” he continued. “Most of the CFPB enforcement actions have dealt with allegations of violations of laws that have been around for decades — the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act and others. 

“The difference we are seeing arises from the fact that the thinly-spread, underfunded FTC simply didn’t have the resources to launch a vigorous enforcement effort.  The CFPB has those resources, and they’re using them,” Hudson went on to say.

To celebrate its fifth birthday, the CFPB mentioned some of its accomplishments in the video available here and at the top of this page with the resources Hudson referenced. Those marks include $11.7 billion in relief for more than 27 million consumers, figures that involved not only auto financing but also credit cards and mortgages.

At the controls of the CFPB is a single director — Richard Cordray — who President Obama appointed at the outset of the bureau’s opening. Someone who knows Cordray well is Shaun Petersen, who now is senior vice president of legal and government affairs at the National Independent Automobile Dealers Association. Petersen spent seven years in the Ohio Attorney General’s office and often crossed paths with Cordray, who eventually became the Buckeye State’s top law enforcement official before overseeing the CFPB.

Petersen previously described Cordray as one of the most intelligent individuals he’s ever encountered. In fact, Cordray has appeared multiple times and won several rounds on the popular game show “Jeopardy!”

“Although the CFPB might be the brainchild of Sen. Elizabeth Warren, it is clear director Cordray’s fingerprints are all over the CFPB,” Petersen said. “How can they not be when he is the sole director of an agency that is virtually insulated from congressional and presidential oversight? 

“The fact that the director personally speaks at field hearings, signs consent decrees and testifies to Congress on these issues is a sign of his personal involvement,” Petersen continued. “When it comes to the bureau’s work with auto finance (or other topic areas), nothing gets done without the director’s blessing.”

Cordray is on tap to appear at the next CFPB field hearing. The bureau scheduled the event for next Thursday in Sacramento, Calif.,  where the topic will be one that’s been quite prevalent with its consumer complaint database — debt collections.

Along with discrepancies on a credit report, CFPB officials emphasized that debt collection is a consumer issue that they want to tackle. Digital Recognition Network chief executive officer Chris Metaxas highlighted what the prudent moves some auto finance companies are making and the areas involving collections where some institutions could improve.

“The key to effective commerce is knowing your customers. That means you need to stay close to them during their entire lifecycle experience with you,” said Metaxas, who will be making one of the keynote presentations during this year’s SubPrime Forum, where DRN is the presenting sponsor for that segment of Used Car Week.

“The mistake that lenders make is that they are reactive to a point in time,” he continued. “During origination, they scramble to get data to close the opportunity, and during collection they scramble to find you when the data was not up to date. 

“That’s why smart lenders are now deploying location intelligence data, like vehicle sightings from DRN, throughout the entire lifecycle of the loan, so they can stay close, communicate frequently and adapt with you to help avert payment challenges,” Metaxas went on to say. “Location intelligence data simply lets lenders know more about their customers to improve their experience.”

The experience for finance companies since the advent of the CFPB certainly has been noteworthy. The bureau made enforcement actions against Ally Financial, American Honda Finance, Fifth Third Bank and more institutions in the auto finance space.

The industry certainly has pushed back, too. For example, the American Financial Services Association tapped Charles River Associates to open its string of rebuttals to contentions by the CFPB about problems with the indirect auto financing process.

The National Automotive Dealers Association has been vocal, as well — most recently with current chairman Jeff Carlson calling for support for measures currently circulating on Capitol Hill to “tame” the CFPB.

While the industry continues to navigate the regulatory demands of the CFPB, entities such as AFSA are looking toward what might happen during the next five years and beyond.

“Obviously, there are so many things that make the CFPB different from other agencies: its structure, its funding mechanism, its enforcement actions in lieu of clear-cut universal rules, etc.,” AFSA spokesperson Jack Ferry said.

“We are in constant dialogue with the CFPB on behalf of our members who are in the auto financing industry and the traditional installment industry. The lines of communication between the CFPB and AFSA are always open,” Ferry added.

And Petersen chimed in again on the dealership side.

“Part of NIADA’s core mission is to educate its dealers on the impact of laws from Congress and regulations from federal agencies, whether that regulation is imposed through a formal rulemaking process or is dictated through advisory guidance or enforcement action, as the CFPB tends to do,” he said.

“I believe dealers are recognizing the impact the CFPB is having on the industry and can have on their dealerships if they are not vigilant,” he went on to say.